Union Acceptance Corporation Announces Fourth Quarter and Year-End Results
29 July 1999
Union Acceptance Corporation Announces Fourth Quarter and Year-End Results
Business Editors
INDIANAPOLIS--July 29, 1999--Union Acceptance
Corporation today announced results for the fourth
quarter and fiscal year ended June 30, 1999, including increases in
net earnings and receivable acquisitions from comparable periods, and
the seventh consecutive quarter of improvement or stabilization in
delinquency and net credit loss ratios.
Net earnings totaled $5.1 million, or $0.38 per diluted share,
for the fourth quarter ended June 30, 1999, compared to a net loss of
$5.1 million or $0.38 per diluted share, reported for the fourth
quarter last year.
For the fiscal year ended June 30, 1999, Union Acceptance
Corporation reported net earnings of $14.3 million, or $1.08 per
diluted share, compared to a net loss of $ 9.8 million or $0.74 per
diluted share for the fiscal year ended June 30, 1998.
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Selected Key Results
-- Net earnings for fiscal 1999 increased over $24.1 million from
the net loss reported in fiscal 1998.
-- Total revenues increased over 268% to $65.9 million in fiscal
1999 from $17.9 million in fiscal 1998.
-- Delinquency on the Tier I automobile portfolio was 2.63% at
June 30, 1999, an improvement from 3.07% at June 30, 1998. This
was the seventh consecutive quarter of improved or stable
delinquency figures.
-- Tier I credit losses totaled 2.20% for fiscal 1999, a decrease of
$3.9 million or 60 basis points from 2.80% reported for fiscal
1998. This was the seventh consecutive quarter of improved net
credit loss statistics.
-- Recovery rates on the Tier I automobile portfolio for the fourth
quarter of fiscal 1999 increased to 41.50%, in comparison to
41.17% in the comparable quarter of last year. For the fiscal
year, recovery rates reached 39.45%, compared to 38.41% for
fiscal 1998.
-- Receivable acquisitions for the fourth quarter were
$368.7 million compared to $270.7 million in the comparable
quarter last year. For the fiscal year ended June 30, 1999, the
Company acquired receivables totaling a record $1.5 billion, an
increase of 50% over $971.3 million receivables acquired in
fiscal 1998.
-- The Company securitized $340.2 million during the fourth quarter
for a gain on sale of $8.4 million. This compares to
$296.6 million securitized in the comparable quarter last year
for a gain of $5.1 million.
-- The Company's total servicing portfolio grew to $2.5 billion at
June 30, 1999, 23.0% higher than $2.0 billion at June 30, 1998.
-- The Company's allowance for estimated credit losses on
securitized receivables was 4.63% as of June 30, 1999, compared
to 4.67% at June 30, 1998.
-- As of June 30, 1999, over 68% of the outstanding portfolio was
comprised of pools securitized after stricter underwriting
standards were implemented in March 1997. Static pool analysis
shows these newer pools performing at loss levels below those of
the 1995 and 1996 pools.
-- At June 30, 1999, $185.5 million of warehouse capacity was
utilized, and an additional $67.2 million was available to borrow
based on the outstanding principal balance of eligible
receivables. In addition, the Company maintained cash on hand of
$8.1 million, for total available cash of $75.3 million as of
June 30, 1999. Total available cash totaled $83.4 million at
June 30, 1998.
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"An increased dealer base, developed through geographic expansion
and increased activity of existing dealers, has allowed us to grow our
receivable acquisitions by over 50% this year. Such growth is
particularly gratifying given our commitment to prime lending. The
impact of improved underwriting and collection practices initiated in
fiscal 1997, can also be seen as both delinquency and credit losses
end the year at the lowest levels in over two years," commented John
Stainbrook, President and Chief Executive Officer. "We continued to
see improvement in almost all categories of our key business drivers."
The following tables set forth delinquency and credit loss
experience related to the Tier I (prime) automobile portfolio:
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Delinquency Experience
----------------------
At June 30, 1999 At March 31, 1999 At June 30, 1998
---------------- ----------------- ----------------
(Dollars in thousands)
Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount
----------- ------ ----------- ------ ----------- ------
Servicing
portfolio 213,746 $2,464,371 207,705 $2,355,418 184,003 $1,978,920
Delinquencies
30-59 days 3,962 41,475 3,650 37,890 3,179 32,967
60-89 days 1,614 16,654 1,633 17,279 1,907 20,819
90 days or
more 670 6,754 646 6,818 657 6,992
----------- ------ ----------- ------ ----------- ------
Total
Delinquencies 6,246 64,883 5,929 61,987 5,743 60,778
----------- ------ ----------- ------ ----------- ------
----------- ------ ----------- ------ ----------- ------
Delinquency
as a percentage
of servicing
portfolio 2.92% 2.63% 2.85% 2.63% 3.12% 3.07%
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Credit Loss Experience
----------------------
Three Months Ended Twelve Months Ended
----------------------------- -------------------
(Dollars in thousands)
June 30, March 31, June 30, June 30, June 30,
1999 1999 1998 1999 1998
-------- -------- -------- ------- -------
Average servicing
portfolio $2,424,663 $2,329,127 $1,968,595 $2,269,177 $1,922,977
Gross charge-offs 20,308 19,139 21,129 82,436 87,325
Recoveries 8,428 7,643 8,698 32,525 33,545
---------- ---------- ---------- ---------- ---------
Net charge-offs 11,880 11,496 12,431 49,911 53,780
Gross charge-offs
as a percentage
of average
servicing
portfolio (1) 3.35% 3.29% 4.29% 3.63% 4.54%
Recoveries as a
percentage of
gross charge-offs 41.50% 39.93% 41.17% 39.45% 38.41%
Net charge-offs as
a percentage of
average servicing
portfolio (1) 1.96% 1.97% 2.53% 2.20% 2.80%
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(1) Annualized
Selected Year-End Results
Net earnings for fiscal 1999 increased $24.1 million from the
prior year, primarily due to a higher gain on sale of receivables,
net, and an improved net interest margin after provision for estimated
credit losses.
The net interest margin after provision for estimated credit
losses increased to $19.7 million in fiscal 1999 from $6.6 million in
fiscal 1998. Interest on receivables totaled $33.0 million for fiscal
1999, compared to $27.9 million for fiscal 1998. This increase
resulted from an increase in the average outstanding balance of
receivables held for sale. Interest expense totaled $27.5 million for
fiscal 1999, an increase from $26.1 million in fiscal 1998, primarily
due to higher average borrowing needs from increased receivable
acquisitions.
Other interest income increased 54.8% to $20.0 million in fiscal
1999 from $12.9 million in fiscal 1998. The increase in other interest
income relates primarily to the implementation of the "cash out"
method of valuing Retained Interest in Securitized Assets ("Retained
Interest") during the quarter ended June 30, 1998. This change
increased the discount, resulting in subsequent increases in discount
accretion.
The provision for estimated credit losses on the held for sale
portfolio decreased to $5.9 million in fiscal 1999 from $8.1 million
in fiscal 1998. This reduction is related to the continued improvement
in performance of the held for sale portfolio.
Gain on sale of receivables, net, totaled $19.1 million in fiscal
1999 and compared favorably to a net loss of $11.9 million in fiscal
1998. The gain on sale of receivables, net, consisted primarily of
gains on securitization transactions of $31.0 million and
$19.6 million, and charges for other than temporary impairments of
Retained Interest of $11.9 million and $23.6 million for the fiscal
years ended June 30, 1999 and 1998, respectively. Securitization
transaction gains for fiscal 1998 were reduced by a change in estimate
totaling $7.9 million, related to the implementation of the "cash out"
method of valuing Retained Interest.
A higher volume of securitized receivables and higher net spreads
contributed to the increase in the gain on sale of receivables. In
fiscal 1999, the Company securitized $1.3 billion, the most for any
fiscal year, and achieved a record net spread of 6.75% for the fourth
quarter securitization.
Servicing fees for fiscal 1999 were $21.7 million, a
13.9% increase over $19.1 million for fiscal 1998. This increase was
the result of a higher average securitized servicing portfolio.
Total operating expenses totaled $42.6 million for fiscal 1999,
or 1.82% of the average servicing portfolio. This ratio is up slightly
from 1.78% in fiscal 1998, but is well below the industry average.
The Company's net pre-tax unrealized gain included in Retained
Interest was $322,000 at June 30, 1999, compared to $12.3 million at
June 30, 1998. The decrease in the unrealized gain relates primarily
to the increase in discount rates utilized in the valuation of
Retained Interest as discussed below. Net of taxes, the unrealized
gain on Retained Interest totaled $199,000 at June 30, 1999 and is
reported as Accumulated other comprehensive income.
During the fourth quarter, management refined its methodology in
determining a market discount rate used to calculate the gain on sale
of receivables and value Retained Interest. As a result, the Company
utilized a discount rate of 900 basis points over the two-year U.S.
Treasury Rate, or 14.3% in determining the gain on sale of
receivables. The Company utilized discount rates up to 900 basis
points over the applicable U.S. Treasury Rate to value Retained
Interest on a pool by pool basis, based on that particular pool's
specific risk factors. The weighted average discount rate used to
value Retained Interest at June 30, 1999 was 12.8%.
For the fourth quarter, this change in estimate had the effect of
reducing the gain on sale by $2.4 million pre-tax ($1.5 million after
tax or $.11 per diluted share). In addition, this change resulted in
an increase in charges for other than temporary impairments of
$717,000, and a reduction of Retained Interest by approximately
$11.8 million pre-tax (a reduction of the unrealized gain by
$7.3 million, net of deferred taxes).
Corporate Description
UAC is one of the nation's largest independent, indirect
automobile finance companies. The Company's primary business is
acquiring, securitizing and servicing prime retail installment sales
contracts. These contracts are originated by dealerships affiliated
with major domestic and foreign automobile manufacturers. The Company
is focused on the upper-end of the credit quality spectrum. Union
Acceptance Corporation commenced business in 1986 and currently
acquires receivables from over 4,200 manufacturer-franchised
dealerships in 35 states. By using state-of-the-art technology in a
highly centralized underwriting and servicing environment, Union
Acceptance Corporation enjoys one of the lowest cost operating
structures in the independent prime automobile finance industry.
Forward Looking Information
This news release contains forward-looking statements regarding
matters such as delinquency and credit loss trends, recoveries of
repossessed vehicles, receivable acquisitions and other issues.
Readers are cautioned that actual results may differ materially from
such forward-looking statements. Forward-looking statements involve
risks and uncertainties including, but not limited to, the relative
unpredictability of changes in delinquency and credit loss rates,
changes in acquisition volume, general economic conditions that affect
consumer loan performance and consumer borrowing practices and other
important factors detailed in the Company's annual report on Form 10-K
for the fiscal year ended June 30, 1998, which was filed with the
Securities and Exchange Commission.
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Union Acceptance Corporation
Selected Financial Data
(Unaudited)
(Dollars in thousands, except per share data)
Balance Sheet Data at: June 30, 1999 June 30, 1998
----------------------------------------------------------------------
Cash $ 8,088 $ 75,612
Restricted cash 12,379 17,823
Receivables, net 267,316 118,259
Accrued interest receivable 2,035 1,045
Retained interest in securitized assets 190,865 171,593
Property, equipment, and leasehold
improvements, net 8,375 7,921
Other assets 25,868 19,280
----------------------------
Total assets $ 514,926 $ 411,533
----------------------------
----------------------------
Amounts due under warehouse facilities $ 185,500 $ 73,123
Long-term debt 199,000 221,000
Accrued interest payable 5,287 6,280
Amounts due to trusts 13,152 15,510
Dealer premiums payable 2,564 1,374
Current and deferred income taxes payable 16,022 9,573
Other payables and accrued expenses 3,922 2,200
----------------------------
Total liabilities 425,447 329,060
----------------------------
Common stock 58,452 58,360
Accumulated other comprehensive income 199 7,609
Retained earnings 30,828 16,504
----------------------------
Total shareholders' equity 89,479 82,473
----------------------------
Total liabilities and shareholders'
equity $ 514,926 $ 411,533
----------------------------
----------------------------
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30+ Delinquency at: June 30, 1999 March 31, 1999 June 30, 1998
----------------------------------------------
Tier I 2.63% 2.63% 3.07%
Tier II 9.42% 8.28% 8.29%
--------------------------------------------
Total 2.78% 2.77% 3.24%
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Allowance Data at:
Allowance for estimated
credit losses on
securitized receivables $ 104,448 $ 100,208 $ 90,203
Securitized receivables
serviced $ 2,256,415 $ 2,178,751 $ 1,929,981
Allowance as a percentage
of securitized receivables
serviced 4.63% 4.60% 4.67%
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Managed Receivable Data at:
Receivables held for sale
Tier I $ 260,857 $ 235,751 $ 108,159
Tier II 886 1,194 7,624
Securitized
Tier I 2,203,509 2,119,661 1,870,750
Tier II 52,906 59,090 59,231
Receivables serviced for
others 912 1,028 1,653
--------------------------------------------
Total Servicing
Portfolio $ 2,519,070 $ 2,416,724 $ 2,047,417
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Union Acceptance Corporation
Selected Financial Data
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Twelve Months Ended
June 30, June 30,
------------------------------------------
Income Statement Data
for the Period: 1999 1998 1999 1998
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Interest on receivables $ 9,739 $ 7,638 $ 33,015 $ 27,871
Other interest 4,694 3,388 20,008 12,922
Interest expense (7,242) (6,897) (27,451) (26,107)
------------------------------------------
Net interest margin 7,191 4,129 25,572 14,686
Provision for estimated
credit losses (1,054) (2,875) (5,879) (8,050)
------------------------------------------
Net interest margin
after provision 6,137 1,254 19,693 6,636
Gain (loss) on sales
of receivables, net 5,954 (6,212) 19,133 (11,926)
Servicing fees, net 5,693 4,781 21,716 19,071
Other revenues 1,528 1,017 5,349 4,087
------------------------------------------
Total revenues 19,312 840 65,891 17,868
------------------------------------------
Salaries and benefits 6,121 5,131 23,572 19,427
Other expenses 4,926 3,934 19,016 16,119
------------------------------------------
Total operating expenses 11,047 9,065 42,588 35,546
------------------------------------------
Earnings (loss) before
provision (benefit)
for income taxes 8,265 (8,225) 23,303 (17,678)
Provision (benefit) for
income taxes 3,185 (3,143) 8,979 (7,856)
------------------------------------------
Net earnings (loss) $ 5,080 $ (5,082) $ 14,324 $ (9,822)
------------------------------------------
------------------------------------------
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Per Common Share Data:
Earnings (loss)
(diluted and basic) $ 0.38 $ (0.38) $ 1.08 $ (0.74)
Book value at June 30, $ 6.75 $ 6.23
Weighted average
shares outstanding 13,249,571 13,231,482 13,241,593 13,226,651
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Receivable Acquisition
Volume:
Tier I $ 368,712 $ 266,930 $1,444,361 $ 944,725
Tier II - 3,738 12,592 24,027
Marine - - - 2,515
-------------------------------------------
Total $ 368,712 $ 270,668 $1,456,953 $ 971,267
-------------------------------------------
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Securitization Volume:
Tier I $ 340,233 $ 267,980 $1,288,071 $ 919,456
Tier II - 28,659 - 28,658
-------------------------------------------
Total $ 340,233 $ 296,639 $1,288,071 $ 948,114
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Ratios:
Return on average
managed assets 0.73% -0.88% 0.55% -0.44%
Return on average
shareholders' equity 22.85% -26.07% 17.49% -12.37%
Operating expenses as
a percentage of average
servicing portfolio 1.78% 1.78% 1.82% 1.78%
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Portfolio Performance:
Net credit loss
(annualized for
the period ended)
----------------
Tier I 1.96% 2.53% 2.20% 2.80%
Tier II 7.53% 6.86% 7.04% 7.67%
Marine - 0.83% - 1.12%
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Total 2.09% 2.67% 2.33% 2.96%
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